2000 Income Tax Severed Letter 2000-0034581 - Supplemental Ruling Request

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Request for amendments to the facts & proposed transactions described in the Ruling as well as consequential revisions to advance rulings.

Position TAKEN:

Requested amendments were incorporated into the Ruling by way of a Supplementary Ruling document.

Reasons FOR POSITION TAKEN:

IT-80.

XXXXXXXXXX
XXXXXXXXXX 			2000-003458
XXXXXXXXXX 

Attention: XXXXXXXXXX

XXXXXXXXXX, 2000

Dear Sirs:

Re: Advance Income Tax Ruling
XXXXXXXXXX - Ruling # 2000-00478 (the "Ruling")

This is in reply to your facsimile dated XXXXXXXXXX in which you requested amendments to the Ruling issued to the above-referenced taxpayer on XXXXXXXXXX, 2000.

Following our review of your request, the Ruling is revised as follows:

1. Insert new paragraph 27.1 which reads:

On or after XXXXXXXXXX, DCO disposed of substantially all of its business assets. The XXXXXXXXXX DCO Debt and the XXXXXXXXXX DCO Debt were repaid out of the proceeds of sale.

2. Paragraph 29(a) is replaced by the following:

ACO will borrow up to $XXXXXXXXXX from a Canadian bank on a "daylight" basis (the "XXXXXXXXXX Daylight Loan").

3. Paragraph 29(b) is replaced by the following:

ACO will lend the full amount borrowed under the XXXXXXXXXX Daylight Loan to BCO by way of a demand promissory note bearing interest at a rate of XXXXXXXXXX% per annum (the "ACO XXXXXXXXXX Loan").

4. Paragraph 29(c) is replaced by the following:

BCO will reduce the stated capital and paid-up capital of its XXXXXXXXXX shares by the full amount received from ACO under the ACO XXXXXXXXXX Loan (which amount was initially borrowed by ACO under the ACO XXXXXXXXXX Daylight Loan) and will distribute the full amount received under the ACO XXXXXXXXXX Loan to ACO as a return of capital.

5. Paragraph 29(d), line 1, the words "XXXXXXXXXX Daylight Loan" are replaced by the words "XXXXXXXXXX Daylight Loan".

6. Paragraph 30(a), line 1, immediately after the words "ACO will borrow", insert the words "up to".

7. Paragraph 30(b) is replaced by the following:

ACO will lend the full amount borrowed under the XXXXXXXXXX Daylight Loan to BCO by way of a demand promissory note bearing interest at a rate of XXXXXXXXXX% per annum (the "ACO XXXXXXXXXX Loan").

8. Insert new paragraph 30(b.1) which reads as follows:

BCO will lend the full amount borrowed under the ACO XXXXXXXXXX Loan to CCO by way of a demand promissory note bearing interest at a rate of XXXXXXXXXX% per annum (the "BCO XXXXXXXXXX Loan").

9. Paragraph 30(c) is replaced by the following:

CCO will apply the full amount received under the BCO XXXXXXXXXX Loan to pay down the BCO Advances.

10. Paragraph 30(d) is replaced by the following:

BCO will reduce the stated capital and paid-up capital of its XXXXXXXXXX shares by the full amount received from CCO on the pay down of the BCO Advances and will distribute the full amount received to ACO as a return of capital.

11. Delete paragraph 31.

12. Under the heading Purpose of Proposed Transactions in the Ruling, paragraph (c) immediately after the words "each of BCO" delete the comma & insert the word "and". Also in line 1, delete the words "and DCO".

13. In Ruling B, line 1, immediately after the words "in paragraphs 29(c)", delete the comma & insert the word "and". Also in line 1, delete the words "and 31(f)".

14. In Ruling C, line 1 & 2, immediately after the words "in paragraphs 29(c)", delete the comma & insert the word "and". Also in line 2, delete the words "and 31(f)".

15. In Ruling D line 1, delete the words "$XXXXXXXXXX of". In line 2, immediately after the words "business or property" insert the words "at least equal to the ACO XXXXXXXXXX Loan". Also in line 2, the words "ACO XXXXXXXXXX Loan" are replaced by the words "ACO XXXXXXXXXX Loan".

16. In Ruling E, line 3, the words "ACO XXXXXXXXXX Loan" are replaced by the words "BCO XXXXXXXXXX Loan".

17. Insert new Ruling E.1 which reads:

The interest on the ACO XXXXXXXXXX Loan or a reasonable amount in respect thereof will be deductible pursuant to paragraph 20(1)(c ) in computing the income of BCO for the taxation year in respect of which such expense is paid or payable, depending on the method regularly followed by BCO in computing its income.

18. Delete Ruling F.

19 In Ruling G, line 1, immediately after the words "XXXXXXXXXX Daylight Loan", delete the comma & insert the word "and". In line 2, delete the words "and the XXXXXXXXXX Daylight Loan".

20. Delete Ruling I.

21. Nothing in the Ruling or in this letter should be construed as implying that the Agency has reviewed any aspect of the transactions described under the heading "Additional Information" in your above mentioned letter.

Notwithstanding the above-mentioned changes, we confirm that the Ruling will continue to be binding on the Agency in the manner described therein, provided that the proposed transactions are completed before XXXXXXXXXX.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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